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Transfer pricing involves setting a price on goods that are transferred between divisions within a single...

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Accounting

Transfer pricing involves setting a price on goods that aretransferred between divisions within a single company. Is thispractice necessary? What are the advantages? Disadvantages? What’san appropriate price if it’s going to be done?

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Transfer price Transfer price is the price at which divisions of a company transact with each other such as the trade of supplies or labor between departments Transfer prices are used when individual entities of a larger multientity firm are treated and measured as separately run entities A transfer price can also be known as a transfer cost Purposes of Transfer Pricing The transfer pricing method allows the company to generate profit figures for each division in separate manner The sales pricing and the production departments can be coordinated through this method The managers can also get aware of the value of the services and the products in other segments of the firm It helps in generating not only the reported profits of the entire center but also the    See Answer
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